Macau Business Daily, Aug 8, 2013 by Business Daily

MOP 6.00 Vitor Quintã Deputy editor-in-chief

Two channels of public broadcaster TDM – including one with rights purchased at a public cost of many tens of millions of U.S. dollars to show European soccer – will not be available to any viewer in Macau after an emergency deal between Macau Cable TV Ltd and public antenna companies. Things could have been even worse. With no deal, the 70 percent of city homes getting television via public antennas would have been blacked out completely. The European soccer seasons start within a fortnight. But there’s no news yet on when the TDM channels will be blacked out and whether or when the problem can be solved. The government also declined to commit to opening up the cable television market when Macau Cable’s theoretically exclusive concession ends next April.

MGM Macau 1 revamping a premium room Page 4

Xiamen Airlines pips Air Macau to new route Page 5

70 pct of start-up firms in Q2 are SMEs Page 6

More on page 2

www.macaubusinessdaily.com

Year II

Number 344

Thursday August 8, 2013

Editor-in-chief Tiago Azevedo

Govt zaps TDM sports channel

April 19, 2013

Sub-concessions drove gaming boom The decision to grant three gaming sub-concessions was legal and necessary to solve Macau’s economic woes back in 2002, says Secretary for Economy and Finance Francis Tam Pak Yuen. Legislative Assembly member Paul Chan Wai Chi yesterday questioned the legal basis for them. Duarte Chagas, legal advisor at the Gaming Inspection and Coordination Bureau, said the casino law approved in 2001 allowed the granting of sub-concessions. Page 3

Melco Crown Q2 net profit doubles Net income attributable to Melco Crown Entertainment Ltd for the second quarter of 2013 more than doubled, to US$181.0 million, compared to US$82.3 million in the second quarter of 2012. The company confirmed it possessed US$300 million net cash. But co-chairman Lawrence Ho Yau Lung said capital spending needs meant the firm would wait until late this year or early next before deciding on a formal dividend policy. Page 3

Data services save CTM from reversal on charges The city’s major telecommunications company saw profits soar in the first half of 2013, as customers spent more on mobile data services. Companhia de Telecomunicações de Macau SARL (CTM) made a profit of HK$101.1 million (US$13 million), up a third from a year earlier, controlling shareholder Citic Telecom International Holdings Ltd said. Citic added it “was mainly due” to an increase in revenue from data services. Page 7

I SSN 2226-8294

Hang Seng Index 21890

21828

21766

21704

21642

21580

August 7

HSI - Movers Name

%Day

BANK EAST ASIA

0.33

SANDS CHINA LTD

TINGYI HLDG CO

-0.10

SWIRE PACIFIC-A

-0.11

KUNLUN ENERGY CO

-0.17

WHARF HLDG

-2.58

PETROCHINA CO-H

-2.65

COSCO PAC LTD

-3.30

TENCENT HOLDINGS

-4.10

BELLE INTERNATIO

-4.19

Source: Bloomberg

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August 8, 2013

Macau

No short-term cure for TV copyright: govt Residents will be unable to watch two TDM channels, thus wasting tens of millions in public money, authorities admit Tony Lai

tony.lai@macaubusinessdaily.com

he copyright issues that will make several channels – including two produced by public broadcaster TDM – “temporarily unavailable” for residents once a deal signed by Macau Cable TV Ltd and 14 public antenna firms comes into effect are “too complicated” to be solved in the short-term, said the Bureau of Telecommunications Regulation. The agreement signed on Tuesday allows antenna firms to relay Cable TV’s television signals through their networks. It prevents a potential TV blackout for the 70 percent of residents that watch television via antenna firms. The Court of Second Instance gave the government in June 90 days to stop the antenna companies from illegally relaying cable television transmissions. Most residents will only be able to watch 40 channels – one-third of the channels they watched now – until next April, according to the agreement. The residents have expressed their discontent on social media and

Two TDM channels – including popular TDM Sports – soon out of reach for most

a TDM radio talk show, particularly over the ban on two TDM channels including TDM Sports. “The copyrights of some

programmes in some channels are not clear and we cannot handle this issue in such a short time,” bureau director Lawrence Tou Veng Keong said. André Cheong Weng Chon, director of the Legal Affairs Bureau, stressed that TDM had bought the free-to-air broadcast rights for English Premier League football matches. He said they could “face strong legal risks” if they allowed TDM Sports to be broadcast without approval from the copyright holder, as Cable TV also bought the cable broadcast rights for those same matches.

Money waste Mr Tou said they “have been working on this issue with TDM” but admitted the broadcast interruption will mean a waste of public money. TDM’s budget is mostly financed by the government. Mr Tou and official from TDM did not disclose the amount the broadcaster used to buy the English Premier League rights between

2010 and 2013. Hong Kong’s Cable TV spent about HK$1.8 billion (US$232 million) in 2009 to buy the rights to broadcast the matches in the neighbouring city during three seasons. Leong Kam Chun, TDM’s chief executive, told reporters yesterday they were now seeking legal advice on whether they could authorise other companies, namely Macau Cable TV, to relay the match signal. “We have to get the nod from the copyright holders or else they will sue TDM,” he said. Mr Leong said he found it “strange” that the public broadcaster was only notified by the government on this issue on Tuesday. Mr Tou played down the issue, saying the channels were “only temporarily unavailable” until the problem was settled. However he gave no timetable on a solution. He added: “It is not like we are shutting down these two channels… The residents can still watch the programme by putting up antennas on their buildings by themselves.”

No pledge on new cable TV provider The government declined to commit itself to opening up the cable television market when Macau Cable TV Ltd’s exclusive concession ends next April. André Cheong Weng Chon, director of the Legal Affairs Bureau, said yesterday it would start to study the issue “by the end of next month”. “We have to see whether we should issue two or three licences, for example…[and] how many should be [for] pay cable television or free broadcast,” he explained. The official said his department “hoped” to finish the preparation for market liberalisation before April 2, 2014.

The government is confident “the residents’ right to watch television will not be affected,” Mr Cheong said. An agreement on Tuesday between Macau Cable TV and public antenna firms ensures that these companies will continue to operate after Cable TV’s licence expires. Mr Cheong also stressed the government would give no future cable television licences to antenna firms. T.L.

August 8,2013 2013 April 19,

Macau

Sub-concessions drove gaming boom: Tam

Melco Crown’s Q2 net profit more than doubles

Decision was legal and necessary to meet Macau’s economic needs, secretary says Stephanie Lai

sw.lai@macaubusinessdaily.com

Firm says City of Dreams taking market share from rivals was important factor Michael Grimes

michael.grimes@macaubusinessdaily.com

N Public tender never legally required for casino sub-concession process, said Francis Tam

he decision to grant three gaming sub-concessions was legal and necessary to solve Macau’s economic woes back in 2002, said Secretary for Economy and Finance Francis Tam Pak Yuen. Legislative Assembly member Paul Chan Wai Chi yesterday questioned the legal basis of the casino sub-concessions and why there was no public tender. Duarte Chagas, legal advisor at the Gaming Inspection and Coordination Bureau, said the casino law approved in 2001 already allowed the granting of sub-concessions, as long as the government approved them. Before the handover, Portugal’s top court had ruled that the existing legislation “did not require any advance bidding process for a sub-concession,” Mr Tam added in a statement he read in person at the assembly.

“Back in 2002 and 2003, Macau’s economy was not doing well and the unemployment rate stood at around six to seven percent then,” the secretary’s statement added. When liberalising the gaming market here, the administration originally invited applications for three casino gaming concessions. These licences were given to: Sociedade de Jogos de Macau SA (SJM) the successor company to Stanley Ho Hung Sun’s monopoly holder Sociedade de Turismo e Diversões de Macau; Wynn Resorts (Macau) SA; and a joint venture between Galaxy Casino SA and United States-based Las Vegas Sands Corp. The latter two partners had a fallout and the government eventually allowed Galaxy to grant a subconcession to a Sands subsidiary, Venetian Macau, SA.

“But the gaming development was soon going fast [after the 2002 liberalisation] and it did substantially improved the local economy,” Mr Tam said, departing from his prepared statement and talking directly to legislators. That would not have happened without the gaming sub-concessions, the secretary added. “The gaming development since then [2002] exceeded the expectations of many, and [that is when] we decided to change our policy” to allow for two more subconcessions, he added. SJM and Wynn were allowed to have sub-concessions as well. SJM sold its rights to MGM Grand Paradise, SA for US$200 million (1.6 bilion patacas) and Wynn to Melco PBL (now Melco Crown Entertainment Ltd) for US$900 million.

Assembly to have bigger say over budget

he government will start informing the Legislative Assembly of any “important budget changes” this year, Secretary for Economy and Finance Francis Tam Pak Yuen said yesterday. Also this year, the Financial Services Bureau will have the power to request detailed budget plans from all government bodies in order to better monitor major infrastructure projects, he added. Mr Tam was replying to an inquiry by legislator Ng Kuok Cheong over several budget overruns, including the Taipa Ferry Terminal, the Hengqin Campus of the University of

Macau and the Light Rapid Transit elevated railway. The government will finish a revision of the budget framework law next year, which will focus on better governance over the budget of public projects. Even before that law is ready, the financial bureau “will be able to request government departments to deliver detailed explanation for major infrastructure projects” and their budgets, said Mr Tam. “All this information will be passed on to the Legislative Assembly for discussion, before getting included in our annual budget plan,” he added.

“For any important changes to the infrastructure projects, the departments in charge should explain the changes to the Legislative Assembly in advance,” the secretary stressed. Mr Tam gave no timeframe for when the Financial Services Bureau will have its power reinforced. Mr Ng, a New Macau Association member, welcomed the government’s move but said it was not enough. The association wants the assembly to discuss all public projects worth more than 40 million patacas (US$5 million) before they are implemented, he said. S.L.

et revenue at Macau casino operator Melco Crown Entertainment Ltd rose by about 38 percent year-on-year in the second quarter, to approximately US$1.30 billion (10.39 billion patacas) compared to US$938.50 million a year earlier. The firm said the improvement was mainly due to higher groupwide rolling chip revenues in the VIP segment and higher mass market gross gaming revenues. Most of the growth was at the firm’s flagship Cotai property City of Dreams, which also reportedly captured market share from its peers in the premium mass table games segment. Co-chairman Lawrence Ho Yau Lung pledges to add hotel rooms there to support further growth in gaming and non-gaming revenue. “We continue to move forward with the fifth hotel tower at City of Dreams and anticipate to commence construction by the end of 2013,” Mr Ho said in a statement accompanying the earnings announcement. He added during the earnings conference call with analysts the new tower would be ready in “probably the end of [20]16, early [20]17”. Altira Macau – MCE’s VIPfocused Taipa property which saw a drop off in performance in the past few years after the ending of a high-commission deal with junket consolidator AMA International – also delivered sequential growth in its earnings before interest, taxation, depreciation and amortisation in the second quarter, said MCE. Melco Crown’s adjusted EBITDA was US$330.1 million for the second quarter of 2013, a 62 percent improvement on the US$203.8 million in the comparable period of 2012. On a U.S. GAAP (generally accepted accounting principles) basis, net income attributable to Melco Crown for the second quarter of 2013 more than doubled, to US$181.0 million, or US$0.33 per American Depository Share, compared to US$82.3 million, or US$0.15 per ADS, in the second quarter of 2012. The company confirmed it possessed US$300 million net cash but pointed out this year and next it has heavy capital expenditure commitments – with its Belle Grande Manila Bay joint venture in the Philippines due to open in the middle of next year, and MCE’s majority-owned Studio City on Cotai set to launch in the middle of 2015. Mr Ho said the issue of instituting a policy of regular dividends for investors would be considered “some time [at] the end of this year, early next year”.

August 8, 2013

Macau

Casinos’ resilience to China’s slowing perks estimates Gambling revenue still recording double-digit expansion despite mixed economic news from mainland Michael Grimes

michael.grimes@macaubusinessdaily.com

everal analysts have increased slightly their estimates for fullyear revenue growth in Macau following July’s 20 percent yearon-year expansion. Gross gaming revenue in the city reached 29.49 billion patacas (US$3.69 billion) last month, the third highest monthly revenue ever recorded. August is tracking for between 12 percent and 17 percent year-on-year growth suggested two other analysts. They base their thoughts on daily revenue of 966 million patacas for the first four days of the month. Carlo Santarelli of Deutsche Bank in New York said in a note that following the release of July’s numbers last week, the institution was tempering slightly – by 50 basis points – its estimate of third quarter year-on-year expansion, but upping its full year growth estimates by 10 basis points. “Our overall revenue forecasts for the third quarter 2013 and 2013 [full year] go to +18.1 percent and +15.4 percent, respectively, versus our prior estimates of +18.6 percent and +15.3 percent, respectively,” he wrote. John Kempf of Canada’s RBC Royal Bank increased his full-year growth estimate by 50 basis points. “We are slightly increasing our 2013 estimate for Macau gaming revenues to 13.5 percent from 13.0 percent,” he stated in an note, citing the continued double digit monthly expansion that’s been seen despite “mixed economic indicators” coming from the mainland. But he appears significantly more cautious than Deutsche Bank regarding the second half of the year.

“Our 11.8 percent estimate for the second half assumes that growth will taper off a bit from the 15.3 percent growth rate in the first half of 2013, as comparisons become more difficult,” writes Mr Kempf. “Still, our new monthly growth rates reflect the upside of recent hotel capacity supply and infrastructure improvements,” he adds.

New projects The city’s six gaming concessionaires and subconcessionaires are either already building or actively planning a total of eight new casino resorts on Cotai. Three of them are by Galaxy Entertainment Group Ltd, with a total investment equal to US$9.9 billion a cco r d i n g to co m p a n y announcements. As well as the eight projects wholly or majority-owned by the market operators, there is a ninth resort – Casino Louis XIII – budgeted at US$800 million and expected to run on a gaming permit from an existing licensee under a so-called ‘service agreement’. The first of those new Cotai schemes won’t open until 2015, so play no real part in analysts’ thinking on current pricing of Macau gaming stocks. “We suggest investors be selective and focus on names that have company specific catalysts, room for earnings upgrades and names that are likely to show stronger growth in 2014,” said Kenneth Fong of J.P. Morgan in Hong Kong in a note on Monday. Mr Fong added investors appear

business as usual

Better late than never Paulo A. Azevedo

pazevedo@macaubusinessdaily.com

t last, the Outer Harbour Ferry Terminal revamp is going to happen. It is painful to wait more than half an hour for your luggage after a long journey and to see all those tourists, packed like sardines in a can, waiting endlessly to be allowed to enter the city. A baggage carousel and the enlargement of the immigration and departure halls will be welcome. Of course, it would be nice to have better shops and maybe a couple of decent restaurants, but I suppose that is asking too much. After all, the revamp is costing – so far – only 80 million patacas (US$10 million). It may take longer than expected – following the example of pretty much all public projects in Macau – which, for sure, would add many more millions to the final cost. With a bit of luck, an increase of 500 percent in the cost – like the increase in the cost of the Pac On ferry terminal on Taipa – will not need to be paid for out of the public coffers. Yes, luck will be needed, because in this tiny little city, to have a project completed at an acceptable cost, within the amount estimated, is a mathematical improbability.

Plenty more from whence they came

to have kept patience with Macau gaming stock prices, despite some suggestions that macro economic uncertainties in China are currently limiting room for price growth. “The feedback we hear from

investors is that while they agree that the sector is not cheap, the Macau gaming sector provides relatively better earnings visibility and growth compared with most other China consumption names,” he stated.

MGM Macau closing one premium room for revamp Las Vegas Room will be shut for a month starting from September, says CEO Michael Grimes

michael.grimes@macaubusinessdaily.com

GM Macau is to close an 18-table premium mass zone on the main floor for a month-long refurbishment starting in September. A high limit slot room will also be revamped. “…during the third quarter, both our high-limit slot room and our Las Vegas table games room will be temporarily offline for refurbishment,” Grant Bowie, chief executive of MGM China Holdings Ltd, told analysts during the parent MGM Resorts International’s second quarter 2013 earnings call on Tuesday. Mr Bowie said MGM China would spend US$56 million on MGM Macau this year. “We believe our continuous upgrade of our product on offer is one of the keys to remain competitive in this market,” he added. Investors appear to agree. “Despite fierce competition from Cotai, MGM China was the only market share winner in [the Macau] peninsula during the second quarter,” George Choi, a Hong Kong-based analyst at Citigroup Inc, wrote in a research

note before Tuesday’s earnings announcement. “We continue to rank MGM China as our most preferred peninsula casino operator, ahead of SJM and Wynn Macau,” he added. “…I don’t expect it to have an overall negative impact over the whole half because…with the refurbishment, we expect to see a pickup in the win rates coming out,” said Mr Bowie in response to an analyst’s question. The Las Vegas Room has been described to Business Daily as “a mid-premium area on the main floor with 18 tables”. It’s understood the refurbishment will include new carpets and other décor improvements. The closure is expected to be for a one-month period between September and October. Karen Tang of Deutsche Bank in Hong Kong said recently Macau casinos typically have four massmarket table games segments. She added that as of June this year, ‘highlimit’ mass tables were generally priced in Macau at HK$1,000 to HK$1,500 per hand.

August 8, 2013

Macau

Xiamen Airlines beats Air Macau to Zhengzhou Mainland carrier will commence flights to the capital of Henan province next month Tony Lai

tony.lai@macaubusinessdaily.com

Xiamen Airlines will launch two new routes to Macau in the next two months

Corporate SJM scholarships for employees’ children Macau casino concessionaire Sociedade de Jogos de Macau SA has given scholarships to 39 young people from the city. A condition of the award programme is that at least one parent must be an SJM employee. This year’s scheme includes ten new awards for outstanding students in 2013, and the renewal of 29 existing bursaries. Each scholar receives 20,000 patacas (US$2,500) per year toward the cost of university study, for a maximum of five years. Three promising students who narrowly missed out on scholarships received 10,000-pataca prizes. Ambrose So Shu Fai, chief executive of SJM, along with executive directors Angela Leong On Kei and Rui José da Cunha and other senior management attended the presentation ceremony. This year a further 26 young people shortlisted for scholarships were each given a 5,000-pataca book subsidy paid for by Ms Leong. She is a two-term member of the Legislative Assembly and is seeking re-election in September.

Macau student Word world champion It’s possible to be a world champion at using the Microsoft Word 2010 computer program. This year that person is Wong Ka Fai from Macau. Mr Wong took the accolade after a contest with the catchy title of the ‘2013 Certiport Worldwide Competition on Microsoft Office’. According to the organiser, 344,000 individual student-age candidates from 90 countries competed to demonstrate their mastery of Microsoft Office products. A total of 100 finalists participated in the ultimate round of competition. In it, entrants had to demonstrate their ability to use Word to create documents for a specific project. The organiser Certiport is owned by the United Kingdom-based Pearson plc publishing conglomerate. Certiport is described as a specialist in testing computer users’ skills. The Microsoft Office Specialist World Championship has actually been in existence for 12 years according to a news release. At an award ceremony in Washington D.C. in the United States, Mr Wong received a US$5,000-(40,000-patacas)scholarship.

ir Macau Co Ltd has seemingly lost out to Xiamen Airlines Co Ltd in the race to launch the first flights to Zhengzhou, in northcentral China. The mainland carrier has applied to begin flying three flights a week to the capital of Henan province via Fuzhou on September 25, the Civil Aviation Authority of Macau told Business Daily in an e-mailed reply. But the authority added the application “is still undergoing review”. While Air Macau has expressed a desire to open the route, the city’s sole airline is still far from reaching that goal, a spokesperson said yesterday. “We still have not confirmed this route as we are still drafting the feasibility report,” the spokesperson said. In April, Air Macau chairman Zheng Yan said the route would be opened in the second half of this year. “We hope to mark out our network of destinations in the mainland first, as there are limited routes there,” he said. “If you do not seize the opportunities first, you may not get the chance again.” Asked whether Xiamen Airlines’

move would impact Air Macau’s decision on this route, the spokesperson said: “We are still considering it. We will issue a press release later on whether or not we start this new route.” The airline did not answer any further questions over the growing market competition. Business Daily sought a comment from Xiamen Airlines for this report but had not received a reply before press time last night. Almost 38,000 tourists from Henan came to Macau in the first half of this year, up by 55 percent from a year earlier. Air Macau and Xiamen Airlines, controlled by two of the three biggest mainland carriers, have been active in Macau, catering to mainland tourists. Air Macau, majority-owned by Air China Ltd, has started three new routes to the mainland this year. Xiamen Airlines, controlled by China Southern Airlines Co Ltd, opens a new route to Tianjin via Xiamen on Saturday. The aviation regulator said in its reply it received no more applications for any new mainland routes.

August 8, 2013 April 19, 2013

Macau

More start-ups relying on smaller seed capital Trend towards bootstrapping continues; new cleaning, security businesses surge in Q2 Stephanie Lai

sw.lai@macaubusinessdaily.com

bout 1,150 new companies were registered in the second quarter of this year, about 200 more than in the same period last year, the Statistics and Census Service said yesterday. More than two-thirds of the start-ups, 787 companies, had a registered capital of less than 50,000 patacas (US$6,300). Some 222 new companies had capital between 100,000 patacas and 500,000 patacas. The trend of starting businesses with minimal capital dominated last year’s start-up scene in Macau and has continued into the first half of this year. From January to the end of June, almost 70 percent of the 2,134 newly established companies had capital of less than 50,000 patacas. About 10 percent of new firms had a capital greater than 500,000 patacas. The wholesale and retail trade remains the most popular sector for new businesses, accounting for more than one-third of all new firms in the second quarter. But it was business services, a group of industries that includes building security guards and cleaning companies, that grew the most rapidly. There were 253 new business services firms established, up by onethird in year-on-year terms, with a

combined capital investment more than tripled to 40.5 million patacas. The remaining new companies in the second quarter were mostly builders and property agencies. The construction industry is rebounding, thanks to work on new casino-resorts in Cotai. But the real estate sector could slump with July’s introduction of the city’s first law to regulate real estate agents. With more firms opening, the total capital of new companies almost doubled in year-on-year terms to 174 million patacas. More than half of the capital came from Macau investors, who pumped around 87.6 million patacas into new firms, up by 55.4 percent from a year earlier. Mainland investors were a distant second with a 22.8-percent share, followed by funds from the British Virgin Islands, 18.1 percent. Looking at the first half, the evolution of the capital inflows to new firms is less impressive: up by 13.7 percent to 328 million patacas. There was 200 million patacas in capital withdrawn in the first six months of this year, as 273 companies were wound down. By the end of June, Macau had 41,648 registered companies, up by nearly 9 percent in year-onyear terms.

Capital bound for new cleaning and security firms has tripled in the last quarter

More public money flows to MUST sports centre Trade union tops Macau Foundation’s subsidy ranking last quarter Vítor Quintã vitorquinta@macaubusinessdaily.com

he Macau University of Science and Technology, or MUST, has received more than 136 million patacas (US$17 million) from the public purse since 2009 for a sports centre. The Macau Foundation revealed yesterday it gave 27.3 million patacas towards the university’s football field and sports pavilion in the second quarter alone, according to data published in yesterday’s Official Gazette. The foundation is the city’s biggest sponsor of not-for-profit entities. It has paid five annual instalments to the body that runs the university. Members of the Legislative Assembly have been critical of the grants to the private university, especially since it has doubled tuition fees for the upcoming academic year. The university was granted land in Cotai in 2001 and did not have to pay a land premium to the government. It pays rent of 151,324 patacas a year. In 2008, the university was offered two more plots under similar

conditions, after it handed back to the government a section of the first piece of land. The government used the land to build roads and for the City of Dreams casino-resort. The University of Science and Technology and its affiliated groups were the biggest beneficiaries of public money last year, with 47

subsidies worth more than 128.4 million patacas, data compiled by the New Macau Association show. But the school was not the biggest recipient of Macau Foundation subsidies last quarter. That honour goes to the Macau Federation of Trade Unions, which received 64.3 million patacas to help

build its new headquarters in Patane and to fund its activities. Handouts from the foundation reached 341.4 million patacas in the second quarter, down by 5.7 percent from a year earlier. Criticism from the public spending watchdog over the foundation’s lax oversight seems to have had an impact. The foundation presided over by Wu Zhiliang reduced the amount of subsidies it granted last year while rejecting more applications. Among other grants the foundation made in the second quarter were a combined 70 million patacas to fund the expansion of two schools: Hou Kong in Taipa and Cham Son in Areia Preta, run by the First Baptist Church. The private Kiang Wu Hospital was given 19.4 million patacas for its Kiang Wu Nursing College and to buy new medical equipment. The City University of Macau got 12 million patacas to buy equipment and refurbish its facilities – named Golden Dragon Campus – in NAPE.

August 8,2013 2013 April 19,

Macau

Data services save CTM from reversal on charges Dominant telecom operator sees market share shrink slightly in first half Vítor Quintã

vitorquinta@macaubusinessdaily.com

he city’s major telecommunications company saw its profit soar in the first half of this year, as customers spent more money on mobile data services. Companhia de Telecomunicações de Macau SARL (CTM) made a profit of HK$497 million (US$64.1 million), up by 10.4 percent from a year earlier, chief executive Vandy Poon Fuk Hei told media yesterday. In a filing with the Hong Kong Stock Exchange yesterday, CTM’s controlling shareholder Citic Telecom International Holdings Ltd said profit growth “was mainly due” to an increase in revenue from data services. CTM’s income from data and c o r p or at e s er vice s – the most profitable segment for telecom operators – rose by 10.7 percent year-on-year to HK$268.4 million. Revenue from Internet services also grew 8.8 percent to HK$232.8 million. CTM remains the only telecommunications company that offers Internet access here, even though the firm’s right to an exclusive concession ended in 2000.

But rival operator Companhia de Telecomunicações de MTEL Ltda is currently in the process of applying for an Internet licence. Growth in data and Internet services was however not enough to offset a decrease in revenue elsewhere. Income from CTM’s mobile business – including sales of handsets – fell by three percent to HK$1.51 billion. CTM remains the dominant operator of mobile telecoms but its market share fell by one percentage point to 46 percent, “mainly driven by the fluctuation in the number of prepaid customers,” Citic Telecom said. The turnover drop was due to the declining sales of smart phones, said Mr Poon. Last week the parent company of rival operator Hutchison Telephone (Macau) Co Ltd said handset sales had fallen because there were fewer “popular devices” being launched. CTM’s revenue from the evershrinking fixed-line market fell by 22.2 percent to HK$214.8 million. In the end the company’s overall

CTM’s mobile telecoms income – including handset sales – fell 3 pct in first half (Photo: Manuel Cardoso)

turnover fell by 2.7 percent to HK$2.23 billion. Citic Telecom, a subsidiary of China’s state-owned Citic Group Corp, became CTM’s controlling shareholder on June 25 with a 99 percent stake. The Hong Kong-listed firm already had a 20 percent stake

and it spent US$1.16 billion (9.27 billion patacas) in buying out Cable & Wireless Communications Plc and Portugal Telecom SGPS SA. The deal helped Citic Telecom triple its profit for the first half of this year to HK$794.1 million, even though its revenue rose just 7.9 percent to HK$1.88 billion.

August 8, 2013 April 19, 2013

Greater China

Beijing fines milk formula makers Six companies to pay combined US$110m penalty Kazunori Takada and Anne Marie Roantree

hina fined six companies including Mead Johnson Nutrition Co, Danone SA and New Zealand dairy giant Fonterra Cooperative Group Ltd a total of US$110 million following an investigation into price fixing and anti-competitive practices by foreign baby formula makers. The other three penalised were Abbott Laboratories, Dutch dairy cooperative FrieslandCampina NV and Hong Kong-listed Biostime International Holdings Ltd, the National Development and Reform Commission (NDRC) said yesterday. The fines, announced just

over a month after the NDRC said it was conducting the antitrust review, coincide with separate pricing investigations into foreign and local pharmaceutical firms as well as companies involved in gold trading. Those probes have yet to conclude. The official Xinhua news agency said the fines were a record for China, although it did not elaborate. Foreign infant formula is coveted in China, where public trust was damaged by a 2008 scandal in which six infants died and thousands of others were sickened after drinking milk tainted with the toxic industrial c o m p o u n d melamine. Foreign brands account for about half of total sales and can sell for more than double the price of local formula. The Firms fined for restricting infant milk market competition, disrupting in the world’s second market biggest economy is set to grow to US$25 Mead Johnson fined billion by 2017. US$33m, Danone US$28m The NDRC said in a statement the fines Others escape fines were for restricting for carrying out ‘selfcompetition, rectification’ – Xinhua setting curbs on minimum prices for distributors and for Infant milk market in China using a variety of to be worth US$25 bln methods to disrupt by 2017 market order.

KEY POINTS

Consumers willing to pay more for foreign brands

Swiss giant Nestle SA, Japan’s Meiji Holdings Co Ltd and Zhejiang Beingmate Scientific Technology Industry and Trade Co Ltd were not punished because “they cooperated with the investigation, provided important evidence and ca r r i ed o u t a cti v e s el frectification”, Xinhua said, citing the NDRC. U.S.-based Mead Johnson, which makes the Enfamil formula, said it would pay 203.8 million yuan (US$33 million) in penalties, while Danone will have to pay 172 million yuan. Biostime said its local unit was fined 162.9

million yuan, while Fonterra was fined 4 million yuan. Mead Johnson, Biostime, Abbott and Fonterra said they would not contest the penalties. Officials at French food group Danone and FrieslandCampina were not immediately available to comment.

Market share After the NDRC probe was announced, a number of companies including Mead Johnson, Danone and Nestle cut prices on their baby formula in China by up to 20 percent.

Analysts said the probe was possibly part of a broader Chinese plan to boost consumption of local infant milk products. But they said the fines were unlikely to damage the reputation of the affected companies. If anything, foreign infant formula makers might increase their market share because of the price cuts. “It will have an impact on domestic brands over the long term as the prices of high-end premium brands come down. Customers will tend to buy the foreign brands as the price gap between

Wal-Mart weighs bid for ParknShop First-round bids for ParknShop due next week

al-Mart Stores Inc is considering making a bid for the Hong Kong supermarket business being sold by a company controlled by Asia’s richest man Li Ka Shing, people familiar with the

matter told Reuters. Mr Li’s Hutchison Whampoa Ltd conglomerate has set an August 16 deadline for initial bids for ParknShop, which it values at as much as US$4 billion, sparking interest from corporate and

private equity buyers. Wal-Mart, the world’s largest retailer, is working with a bank as it weighs its options for ParknShop ahead of next week’s preliminary bid deadline, the people said. Wal-Mart declined to

comment. The sources declined to be identified because the discussions are confidential. Last year, Wal-Mart announced plans to open 100 new stores in China over the next three years and create 18,000 jobs in an effort to boost its mainland China business. Wal-Mart opened its first China store in 1996 and now operates over 380 stores spread across various formats, including

Supercenters, Sam’s Clubs and Neighbourhood Markets. But foreign retailers such as Wal-Mart have found it challenging to manage growth in China. Sun Art Retail Group Ltd, a joint venture between Taiwan conglomerate Ruentex Group and privately held by French retailer Groupe Auchan SA, is China’s largest hypermarket chain. While private equity firms were not initially invited to participate in the process, more recently KKR & Co LP and TPG Capital have been invited to bid, the people said. Other buyout Estimated value of firms including Hutchison Whampoa’s Blackstone Group LP have held talks supermarket chain with banks about financing a possible bid, they added. Japan’s Aeon Co Ltd, China Resources

US$4 bln

August 8,2013 2013 April 19,

Greater China domestic and foreign brands narrows,” said Jacqueline Ko, an analyst at Maybank Kim Eng Research. Fonterra, the world’s biggest dairy exporter, said it would give additional training to sales staff and review its distributor contracts in the wake of its fine. “We believe the investigation leaves us with a much clearer understanding of expectations around implementing pricing policies,” Kelvin Wickham, president of Fonterra Greater China and India, said in a statement. Fonterra is embroiled in a separate milk powder contamination scare that has led to product recalls in China, Hong Kong and elsewhere in Asia. A source with direct knowledge of the China investigation said the NDRC was concerned with manufacturers suggesting retail prices to distributors and then offering incentives if these were met, believing this was tantamount to dictating retail prices. The agency also told the firms they had inhibited fair competition by setting up regional distributors and discouraging them from selling outside their territories, said the source, who spoke on condition of anonymity because he was not allowed to speak to the media. The milk sector is still relatively young in China, with consumption of dairy products growing at an annual compound rate of 20 percent, a contrast to U.S. and European markets where demand has been shrinking in the past decade. Reuters

analysis

Property firms quietly start refinancing Ban on refinancing was in place since August 2009

hina’s Sundy Land Investment Co said yesterday it plans to raise 1.5 billion yuan (US$250 million), a sign that a ban on refinancing by listed developers has been quietly lifted as the government looks to ease its grip on the property sector. Sundy plans a private placement of 312.5 million new yuan-denominated shares to fund two housing projects in the eastern Chinese cities of Nanjing and Hangzhou, it said in a filing to the Shanghai Stock Exchange. China’s property sector has continued growing even as the broader economy slows, and the government has had to tread a fine line between trying to control rising home prices while simultaneously sustaining the sector’s contribution to the economy. Since July a handful of real estate firms have announced refinancing plans, but Sundy is the first to say that proceeds will be used for developing housing projects.

“The recent developments have given clear signs that a ban on property firms’ refinancing has quietly been lifted,” said Zheng Weigang, head of investment banking at Shanghai Securities. “These developments are also part of a government’s relaxation of a sweeping clampdown on the property sector in place over the past few years.” China has suspended refinancing by listed property firms since August 2009 as part of its attempts to control surging prices that are putting homes beyond the reach of average wage earners, raising the potential for social unrest. The last such refinancing was Gemdale Corp’s placement to raise 4.2 billion yuan in 2009. Speculation of looser controls has picked up in recent weeks amid increasing signs of a sharp slowdown in growth in the world’s second-largest economy. Property investment is one of the pillars of the economy. Reuters

Yue Xiu mulls bid for Chong Hing bank Liu family stake valued at about HK$5.86 billion

Enterprise Ltd, Sun Art Retail, and Australian retailers Wesfarmers Ltd and Woolworths Ltd are among the eight parties invited to the process and weighing bids, Reuters previously reported. The auction is generating interest as it offers an opportunity to operate in a market that is dominated by two large players. Mr Li’s ParknShop and Singapore’s Dairy Farm International Ltd dominate Hong Kong’s supermarket business. ParknShop has a 33.1 percent share and Dairy Farm has 39.8 percent, according to London-based Euromonitor. ParknShop, which operates 345 stores in Hong Kong, mainland China and Macau, earned HK$21.7 billion (US$2.8 billion) in revenue last year, according to a recent statement from Hutchison. About 270 of the stores are located in Hong Kong. Reuters

ue Xiu Group, a trading arm of China’s Guangzhou city government, is considering a bid for Hong Kong familyrun lender Chong Hing Bank Ltd, according to a person familiar with the matter. While talks are at an early stage, Yue Xiu is arranging financing for an acquisition, the person said without giving the size of the stake, asking not to be identified because the discussions are confidential. The founding Liu family had about 60 percent at the end of December, according to Chong Hing’s annual report. That was valued at about HK$5.86 billion (US$756 million) yesterday, data compiled by Bloomberg show. Chong Hing chief executive Lau Wai Man said in March that the lender was open to proposals from prospective buyers for all or part of the bank. Takeover speculation has mounted since November, when Mr Lau became the first CEO from outside the Liu family.

The shares rallied 38 percent this year. “This would suggest that the interest in Hong Kong banks could also be coming from mainland conglomerates instead of mainland financial institutions only,” Grace Wu, an analyst at Daiwa Capital Markets Hong Kong Ltd., said. “Cross-border financing is the key growth driver for Hong Kong banks in the next few years. Getting a mainland partner will be good for mid-cap banks.” Chong Hing, the smallest of Hong Kong’s four familyrun banks, was suspended from local trading, according to a statement from the city’s stock exchange yesterday. Miranda Tse, a spokeswoman for Chong Hing, declined to comment. Officials at Yue Xiu Group didn’t respond to calls seeking comment. First-half net income rose 6.4 percent from a year earlier to HK$276 million, the bank said in a filing yesterday. Bloomberg News

Chinese commodity prices up despite gloom

Clyde Russell Reuters market analyst

t’s not hard to find bearish commentary on the outlook for China’s commodity demand, but every so often a little bit of information contrarian to the prevailing market views comes along. Such a snippet is the latest China Commodity Index compiled by ANZ Banking Group, which shows the weighted average price for a basket of commodities imported by China rose to a three-month high last week. The index gained 0.6 percent in the week ended August 2, with only industrial metals detracting from the increase. It’s 0.4 percent higher than three months ago, but 2.7 percent below the level a year earlier. Although it doesn’t have a long history, the ANZ index is useful as it tracks 22 major commodities and is weighted to reflect China’s consumption. The idea that prices of commodities most commonly used in the world’s largest consumer are at a threemonth high appears at odds with other recent evidence that economic growth is stalling. The rise in the official Purchasing Managers’ Index to 50.3 in July from 50.1 in June has been about the only significant recent Chinese economic data that has surprised on the upside. It was also in contrast to the HSBC Holdings Plc manufacturing PMI, which fell to an 11-month low of 47.7 in July, well below the 50-level that separates expansion from contraction on a monthly basis. The concern over weakness in manufacturing and the impact of the authorities’ efforts to restructure the economy has led to questions as to whether China will achieve its 2013 target for 7.5 percent growth in gross domestic product. Worries over China have permeated to commodity-producing countries like Australia, with fears rising that the boom in natural resources is over and the country is now left with the hangover of overinvestment in mines. But as the ANZ index reminds us, sometimes the actual data doesn’t quite tally with the prevailing sentiment. However, it’s worth looking at the index in detail, as the softness in China’s economic growth has sharpened differences between the performance of different types of commodities. Since the index is at a three-month high, a good place to start is to look at the sector which has been the best performer and that is agricultural commodities by some margin.

Agriculture wins The agricultural sub-index, which has a weighting of 25 percent and contains pork, corn, rice, wheat, soybeans, cotton, palm oil and sugar, has gained 7.6 percent in the past three months. The only other sub-index with a positive return was the 1.6 percent gain for energy, which carries a 39 percent weighting and is made up of Brent oil, thermal coal and natural gas.

Bulks, with a 21 percent weighting and consisting of iron ore and coking coal, declined 3.2 percent. Industrials, made up of copper, aluminium, rubber, lead, zinc and nickel, declined 4.9 percent, while precious metals, weighted a 3 percent and consisting of gold, silver and platinum, slumped 11.4 percent. The breakdown of returns does highlight that the manufacturing sector has been the one doing it tough in China. The performance for energy would have been stronger if it weren’t for thermal coal, with spot prices at Newcastle Port declining almost 11 percent since the end of April, and by 16 percent since the start of the year. Coking coal, used in steel-making, is mostly to blame for dragging down bulks, as spot iron ore prices have dropped by only 3 percent since the end of April. However, it should be pointed out that iron ore hasn’t been steady over the past three months, first slumping to its 2013 low of US$110.40 a tonne on May 31 and then rallying 18 percent to close yesterday at US$130.20. Iron ore has gained on hopes that steel demand will increase as China ramps up infrastructure spending, mainly on high-speed railways. If the ANZ index is to continue to post gains, it’s likely that the drivers will rotate, with industrials picking up as manufacturing benefits from some domestic stimulus and a brighter outlook for exports as the U.S. economy recovers. Meanwhile the agricultural subindex may struggle to replicate its performance, given weakness in global prices for soybeans, rice, palm oil and natural rubber. Overall, the ANZ index serves as a reminder that too much of the focus when looking at China’s commodity demand is placed on industrial metals and the manufacturing outlook. While China’s export-orientated factories have been the driver of the nation’s spectacular growth over the past two decades, their relative importance to the economy is starting to diminish, and so to will the influence of the commodities they consume. Reuters

As the ANZ index reminds us, sometimes the actual data doesn’t quite tally with the prevailing sentiment

10 10

August 8, 2013 April 19, 2013

Greater China

RMB10.7 trln

Local-govt debt at the end of 2010, estimated the National Audit Office

Surging debt pressures leaders to avert lost decade Bad debt could have ‘significant impact’ on growth, analysts say

Chinese lending spree of the magnitude that tipped Asian nations into crisis in the late 1990s and preceded Japan’s lost decades is putting pressure on top leaders to map out a strategy to tackle the threat. Half of the economists in a Bloomberg News survey say nonperforming local-government and corporate debt will probably have a “significant impact” on China’s credit and economic growth. The central government will deal with bad loans at local governments in the next 18 months by expanding the municipal-bond market and letting localities refinance with direct bond sales, respondents said. Avoiding a fate akin to Japan’s growth collapse of the 1990s hinges on Chinese officials’ ability to reduce debt and shift policy, JPMorgan Chase & Co says. President Xi Jinping and Premier Li Keqiang, developing a reform strategy due at a Communist Party meeting later this year, may get input from a State Council-ordered audit of government borrowings and a World Bank-assisted study on urbanisation. “The debt ratio is absolutely dangerous, there is no question,” said Yao Wei, China economist at Societe Generale SA in Hong Kong, ranked by Bloomberg as the most accurate forecaster of the nation’s gross domestic product. “There is a high risk that this debt issue will have significant downside pressure on Chinese growth in the next few years.” Local-government debt may have surged by as much as 50 percent since the end of 2010. Borrowings as of June 30 ranged from 15 trillion yuan (US$2.4 trillion) to 16 trillion yuan, according to estimates of four analysts. That compares with the National Audit Office’s 10.7 trillion yuan estimate for the end of 2010. The agency said July 28 that the cabinet ordered a new nationwide review of government debt. China today and Japan in the 1980s share a build-up in broad

measures of credit to almost double the economy’s size, JPMorgan analysts said in a July 19 report. China’s credit-to-GDP ratio rose to 187 percent in 2012 from 105 percent in 2000, compared with Japan’s increase to 176 percent in 1990 from 127 percent in 1980, JPMorgan said.

Asian comparisons Investor inquiries on the similarities between China now and Japan then prompted the report, said Grace Ng, a JPMorgan economist in Hong Kong. “Normally and internationally speaking, if a country’s debt ratio increases so rapidly, its probability of financial crisis is higher,” Ms Ng said. While risks may be reduced by forces such as that the increase is in debt held mainly by domestic investors and the national savings rate is more than 50 percent of GDP, “these mitigating factors also existed in Japan in the late 1980s,” JPMorgan said in its report. Goldman Sachs Group Inc draws a comparison to the Asian crisis of 1997-98, saying China’s debtto-GDP ratio has increased by 56 percentage points in the five years through 2012. Thailand had an advance of 66 percentage points and Malaysia’s was 40 percentage points in the five years before Asia’s turmoil, Goldman Sachs said in a July 26 report. Nomura Holdings Inc said earlier this year that the “5-30” rule shows rising risks of a financial crisis in China. That’s because leverage in Japan, Europe and the U.S. increased by about 30 percent of GDP in the five years before crises, compared with Nomura’s estimate of 34 percent in the five years through 2012 for China. China’s stock of credit is among the highest in the world at its level of per capita GDP, the International Monetary Fund said last month in its annual report on the nation’s economy. Yet comparisons with Japan are “misplaced” because Japan also had property and stock bubbles that burst

KEY POINTS Local-govt debt may have surged by as much as 50 pct Borrowings between 15-16 trln yuan as of June 30 – analysts State Council orders nationwide review of government debt Detroit’s bankruptcy ‘sounded alarms’ in China – economist

with “debilitating consequences,” said Murtaza Syed, IMF deputy resident representative in Beijing. “China is still at a relatively early stage of its development, and so with the right policies and reforms it can look forward to many years of still relatively strong growth,” Mr Syed said. Investors will see China’s progress in tackling the issue in July credit and lending data due by August 15, with the median analyst estimate for money-supply growth of 13.9 percent. That’s down from 14 percent in June, when a governmentengineered cash squeeze helped curb shadow banking. The Asian Development Bank may lower its 2013 and 2014 growth forecasts for China in October, chief economist Rhee Chang Yong said in an e-mail. The bank in a July 16 report gave a 2013 projection for 7.7 percent expansion. Last month’s bankruptcy filing by the U.S. city of Detroit “sounded alarms for many local Chinese governments,” said Hu Yifan, chief economist at Haitong International Securities Group in Hong Kong. The situation is “actually not so scary if you take the size of stateowned assets into consideration,”

Ms Hu said. Yu Yongding, a former central bank adviser, estimated the assets’ value at 100 trillion yuan, almost double GDP. Even so, policymakers “better not fall asleep” on crisis risks, Mr Yu said at a July 31 forum in Beijing. “I’m suspicious of local governments’ willingness and abilities to repay their debts,” Mr Yu said.

Defining policies The World Bank said in November it’s working with the State Council’s Development Research Centre on an urbanisation study, at Premier Li’s request, after co-publishing a report last year proposing reforms so China can become a high-income society by 2030. Concern that financial risks will harm growth has weighed on stocks this year, with the Shanghai Composite Index down 15 percent from its 2013 high on February 6. The Bloomberg News survey, conducted from July 24 to July 31, found three of 12 respondents expect bad debt to have a “significant impact” on credit and economic growth, with two seeing a “very significant impact” and one expecting a full-blown financial crisis. Six analysts saw a small effect on lending and the economy. While 11 analysts unanimously said China would expand municipal bond sales, five respondents said China may also sell non-performing loans to bad-debt managers or create new managers. Three said China would allow some local-government financing vehicles to default on debt. Respondents could choose more than one answer. Ding Shuang, senior economist at Citigroup Inc in Hong Kong, said China may slow down debt expansion and then use measures including developing capital markets, he said. “I don’t think it’ll be resolved easily,” said Mr Ding, who previously worked at the IMF. “It’s a venture the Chinese government has never had at this scale and this sophistication.” Bloomberg News

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August 8,2013 2013 April 19,

Asia

Tainted dairy stocks removed: Fonterra CEO NZ frets about reputation but auction reassuring Naomi Tajitsu

ew Zealand co-operative Fonterra Cooperative Group Ltd, the world’s biggest dairy exporter, said yesterday that a contamination scare in some of its exported products was caused by human error, and all tainted stocks had now been taken out of the market. Chief executive Theo Spierings, seeking to reassure customers and worried parents who feed their infants with formula milk made from the company’s whey protein concentrate, said there was now little or no risk to consumers. New Zealand, which depends on the dairy industry for a quarter of its total exports, has been gripped by worries that a raft of recalls for infant formula in China, a major market, and other countries could snowball into a slump in demand or even bans for other dairy products. Fonterra said at the weekend it had discovered whey protein products that contained a bacteria that can cause botulism. It said previously its tests had found the contamination in a dirty pipe at one of its plants. No injuries have been reported due to the contamination. Mr Spierings, who rushed to China at the weekend to apologise for the scare and try to win back customer confidence, said the situation there was stable. “I said at a press conference in China that I would not leave before the situation was stable from the perspective of markets, consumers, customers and global authorities,” he told reporters at the company’s headquarters in Auckland yesterday. “We had all those discussions yesterday, and

The situation is now stable, says Theo Spierings

Management, a China-based New Zealand consultancy, also said New Zealand had to work hard to regain international confidence, even after Fonterra had gone public about the contamination issue. “The fact they did it the way they did it has caused damage which needs to be repaired. I think there are many, many weeks and months where New Zealand has to repair the perception of the integrity of its clean, green image, it’s claim of being ‘100 percent pure’. Perhaps we can re-brand ourselves as being ‘99 percent pure’,” he told Reuters Television. At the first international auction of its dairy products since news of the contamination – which didn’t include those products connected with the scare – prices slipped 2.4 percent but stayed near their recent high levels on the back of strong demand from growing middle classes in emerging economies. Fonterra’s fortnightly auction, the biggest wholesale marketplace for milk powders and dairy produce, saw a near doubling in volumes made available. Economists said the sale suggested customers would continue to pay a premium for New Zealand dairy products. “It does not seem that the contamination issue is evolving into a serious negative for the wider economy,” Westpac Banking Corp economist Nathan Penny said in a note to clients. “The world is still paying high prices for most New Zealand products.” Reuters

I decided late last night that the situation is stable.” Asked if he would resign over the company’s handling of the scare, Mr Spierings said: “It’s not up to me to answer, that’s up to the board.”

Auction reassures Finance Minister Bill English told parliament earlier that the scare did not appear to have had much impact on the economy, but would need careful handling if Fonterra and New Zealand were to continue to benefit from high commodity prices. “The indications are that, providing the issue of the potential

contamination is handled effectively and transparently, the direct impact on the New Zealand economy can be contained,” he said. But Trade Minister Tim Groser said New Zealand had a lot of work to do to regain trust among global customers. “The market is being very measured in its reaction, in the same way that Chinese authorities have been very measured in their actions,” he told Radio New Zealand. “Having said all those positives, let’s agree that we’re not out of the woods here, this problem is not now settled in any sense of the word.” David Mahon, managing director of Mahon China Investment

KEY POINTS Contamination caused by human error CEO says up to Fonterra board to decide on his future Auction suggests trade will still pay premium for NZ dairy produce

Hirai under pressure to fix Sony Loeb wants company to lay out goals for entertainment unit

ony Corp’s rejection of billionaire Daniel Loeb’s push to sell part of its entertainment assets puts more pressure on chief executive Kazuo Hirai to revive the company’s sagging film and electronics businesses. Sony directors turned down a proposal by Mr Loeb’s Third Point LLC hedge fund to sell as much as 20 percent of those assets in an initial public offering. Full ownership of the movie, TV production and music units is integral to Sony’s strategy for revival, the board said in a letter to Mr Loeb. The billionaire said he was “disappointed” with the decision. Mr Hirai, on the job for 16 months, is pushing his “One Sony” vision to unite mobile devices and TVs with games, music and film content. After posting a profit in smartphones and television sets, Mr Hirai has committed to rejuvenating a film unit that slumped to No. 6 at the U.S. box office this year after being No. 1 last year.

Kazuo Hirai promised to boost transparency

“Now that he has turned down th e p r o p o s a l , th e p r es s u r e o n Hirai will likely increase to boost entertainment earnings,” said Masamitsu Ohki, a fund manager at Stats Investment Management

Co in Tokyo. “Sony’s management will probably add more resources in the entertainment area and may get more outside experts to strengthen the entertainment operation.” Funds controlled by New York-

based Third Point built a 6.9 percent stake in Sony and, beginning with a May 14 letter, pushed the board to raise cash through an IPO and then use the money to help “revitalise” its consumer electronics units. Sony’s financial advisers met with Third Point within the past month and studied at least 30 cases of IPOs that began as partial spinoffs and wound up either fully separate or being bought back, according to two people familiar with the matter. Mr Loeb now expects Sony to lay out a specific improvement plan and set financial targets for its entertainment business before the company’s annual general meeting next May, a source close to the hedge fund told Reuters. While Third Point would prefer a spin-off, it is satisfied with Sony’s promise to boost transparency and profits in its entertainment unit, said the source. Bloomberg News/Reuters

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August 8, 2013 April 19, 2013

Asia Philippines may charge coast guards with homicide The Philippines recommended homicide charges be laid against eight of its coast guard members over the killing of a Taiwanese fisherman in disputed seas, as Taiwan officials indicated economic ties would soon be restored. Four people may also be charged with obstructing justice over spliced video evidence, National Bureau of Investigation Director Nonnatus Rojas told reporters yesterday. Taiwan’s Deputy Foreign Minister Joseph Shih told reporters in Taipei yesterday his ministry would recommend that economic sanctions on the Philippines be lifted.

Jet, Etihad deal to be closed soon Jet Airways (India) Ltd rose the most in more than a week in Mumbai after Etihad Airways PJSC said its deal to buy a stake in the Indian carrier will conclude in about a week. The stock rose as much as 4.4 percent to 323.90 rupees. The stake purchase will be concluded “hopefully in the next seven or eight days,” Etihad chief executive James Hogan said at an event in Sydney yesterday Mr Hogan said he is visiting Mumbai tomorrow. The agreement will help Jet raise 20.6 billion rupees (US$336 million) by selling a 24 percent stake as the Indian carrier seeks funds for fleet expansion and lowering debt.

Vietnam bank fix starts with US$474 mln debt State-owned enterprises responsible for more than half of the banking system’s bad debt

ietnam’s state asset management company, tasked with cleaning up bad loans, said it will acquire as much as 10 trillion dong (US$474 million) of spoiled debt over the next two months as it considers possible foreign funding. Vietnam Asset Management Co will issue special bonds to about 10 banks in exchange for as much as 10 trillion dong of non-performing loans in the next two months, chief executive Nguyen Huu Thuy said in an interview in Hanoi yesterday. The lenders will be able to use the bonds to secure funding from the central bank, he said. “We can start buying the first batch of bad debt in the next two weeks,” Mr Thuy said. “This will send a positive signal to the market and investors, so they can see how quickly we can move forward and how determined we are in resolving bad debt.” Prime Minister Nguyen Tan Dung is seeking to overhaul almost US$5 billion in bad debt at banks that has crimped lending, and revive an economy that last year grew at the slowest pace since at least 2005. Vietnam is emulating a model tested by neighbours from Malaysia to China in forming an entity to acquire

loans from banks, as it seeks to revive investor confidence. “This is a brand new development and it’s long overdue,” Alan Pham, chief economist at VinaCapital Group in Ho Chi Minh City, said. “Any concrete action or step by the VAMC will be welcomed by the market. The purchase of debt is a new step on this long road to resolving bad debt.” The asset company will “prioritise” buying debt from banks that have the highest non-performing loan levels and will require these to be backed by property and other assets, Mr Thuy said. Asked whether these are real-estate loans, state-owned company debt or other borrowings, he said there is a variety. The majority of Vietnam’s bad debt is in local currency, he said. The central bank estimates bad debt at 7.8 percent of outstanding

US$5 bln VALUE OF BAD DEBT HELD BY VIETNAMESE BANKS

loans at the end of last year. About 35 percent of property loans were non-performing as of the end of 2012, according to the National Financial Supervisory Commission. The country’s outstanding property loans stood at 230 trillion dong as of March 31, according to the central bank. State-owned enterprises account for about 53 percent of the banking system’s bad debt, according to the finance ministry. Lenders with bad-debt ratios of 3 percent and above will be required to sell their non-performing loans to the asset management company, according to a May government statement. The VAMC will purchase debt at book value and sell it at market value, and plans to propose the central bank allows it to buy bad debt at market value after 2013, Mr Thuy said. The company has spoken to international banks with clients who have expressed interest in buying bad debt, and wants to encourage foreign investors to participate in buying the assets, he said. “We will auction the debt at a discount and someone will have to take a loss,” Mr Thuy said. “The banks and their borrowers will have to share the loss.” Bloomberg News

BOJ seen adding stimulus by June The Bank of Japan will expand its record easing by June next year as inflation remains distant from its 2 percent target, according to a survey of economists by Bloomberg News. Twenty of 26 analysts expect more stimulus in the next 10 months, while all said the bank would keep policy on hold at a two-day meeting that started yesterday. Consumer prices excluding fresh food, the BOJ’s preferred measure of inflation, rose 0.4 percent in June. Koichi Hamada, advisor to Prime Minister Shinzo Abe, said yesterday that BOJ Governor Haruhiko Kuroda should be prepared to add easing if the economy falters after a planned sales-tax increase in April.

Philippines bullish on economic growth The Philippine economy can grow faster than a government target of 6-7 percent this year, but headwinds from the global economy are keeping officials conservative in their forecasts, the country’s economic planning chief said on Wednesday. The Southeast Asian country posted the region’s fastest annual growth in the first quarter, and was the only nation which received an upwardly revised forecast from the International Monetary Fund. “We’re optimistic we can grow beyond 7 percent this year, but given external risks we maintained the GDP target,” Arsenio Balisacan, economic planning secretary, told a budget hearing at the lower chamber of Congress.

Chubu Electric to buy power supplier Chubu Electric Power Co Inc will take control of a Tokyo-based electricity supplier, sources said yesterday, giving the utility an entry into the territory of Tokyo Electric Power Co, which is struggling with losses from the Fukushima disaster. The move by the Chubu Electric to buy an 80 percent stake in independent power supplier, Diamond Corp, is the first significant incursion by one of Japan’s regional electricity monopolies into another’s turf. Chubu Electric is paying 1 billion yen (US$10.3 million) for the stake in Diamond Power, the Nikkei newspaper reported yesterday.

Abbott vows to cut Australia company tax

ustralian opposition leader Tony Abbott, whose coalition has a slight lead in opinion polls ahead of the September 7 election, vowed to trim company taxes by 1.5 percentage points in his first major campaign promise. “Reduced company tax will result in more economic activity,” Mr Abbott told reporters yesterday, announcing the rate would be lowered to 28.5 percent on July 1, 2015, should his Liberal-National coalition win government. “It will be good for jobs, it will good for prosperity, and ultimately will be good for government revenue.” The announcement comes as Mr Abbott, 55, who trails as preferred prime minister even as the coalition holds an advantage in polls, seeks to transform his image into that of a leader with a policy platform for the nation. The ability of the opposition and the Labor government of incumbent Prime Minister Kevin Rudd, 55, to lure votes with spending promises is hampered by a slowdown in economic growth and government revenue. “It’s the sort of policy you’d expect from the coalition, which is traditionally seen as representing big business,” said Paul Strangio, a senior lecturer in politics at Monash University in Melbourne, who expects a coalition victory. “One of the intriguing dynamics of this campaign is that the government coffers are so tight, so funding promises is tricky.” Lowering the rate would partly

Tony Abbott

offset the cost to companies of the coalition’s plan for paid parental leave, Mr Abbott said, adding it would shave A$5 billion (US$4.5 billion) off the forward budget estimates. The opposition would announce budget savings before the election, Shadow Treasurer Joe Hockey said

at yesterday’s announcement. Mr Rudd received a boost on Tuesday when Australia’s central bank cut its benchmark rate to a record low 2.5 percent in a nation where about 90 percent of mortgagees have variable-rate loans. Bloomberg News

13 13

August 8,2013 2013 April 19,

Markets Gaming Stocks - Daily Performance (Hong Kong Stock Exchange) 67.3

41.9 41.6

22.6 22.4

67.2

41.3

22.2 67.1

41.0

Max 41.85

Average 41.404

Min 40.75

Last 40.85

40.7

22.0 Max 67.25

Average 67.170

Min 67

67.0

Last 67

42.9

42.7

42.5

Max 42.85

Average 42.641

Min 42.35

Last 42.55

42.3

Max 20.15

Average 19.978

NAME

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

WTI CRUDE FUTURE Sep13

105.05

-0.237416904

12.08920188

108.9300003

86.23999786

BRENT CRUDE FUTR Sep13

107.6

-0.536143465

1.251529124

114.3699951

96.65000153

GASOLINE RBOB FUT Sep13

290.14

-0.469966725

5.971730158

309.1700077

260.2499962

GAS OIL FUT (ICE) Sep13

909.75

-0.246710526

0.220324979

980

832.5

3.302

-0.482218204

-8.226792663

4.517000198

3.292000055 275.5500078

NATURAL GAS FUTR Sep13 NY Harb ULSD Fut Sep13 METALS

299.51

-0.438786025

0.05344914

319.1699982

Gold Spot $/Oz

1281.41

-1.0479

-23.0135

1796.08

1180.57

Silver Spot $/Oz

19.4193

-1.8533

-35.5055

35.365

18.2208

Platinum Spot $/Oz

1422.75

-1.2836

-6.2593

1742.8

1294.18

719.8

-1.1807

2.8785

786.5

572.7

1788.5

-0.638888889

-13.72407139

2200.199951

1758

LME COPPER 3MO ($)

7005

0.214592275

-11.67570294

8422

6602

LME ZINC

1858

-0.64171123

-10.67307692

2230

1779

Palladium Spot $/Oz LME ALUMINUM 3MO ($)

3MO ($)

LME NICKEL 3MO ($) AGRICULTURE ROUGH RICE (CBOT) Sep13 CORN FUTURE

Last 19.92

Min 22.85

21.8

Last 21.85

20.2

22.0

20.1

21.8

20.0

21.6

19.9

21.4

19.8

13730

-1.009372747

-19.51934349

18920

13205

15.685

-0.063714559

1.817591691

16.47500038

14.60000038

Dec13

COUNTRY MAJOR

CROSSES

Max 21.95

Average 21.637

Min 21.2

21.2

Last 21.45

0.163309744

-23.30137557

665

455

664

0.188608072

-19.09838562

913

654

SOYBEAN FUTURE Nov13

1167

-0.021417862

-10.42026482

1409.75

1165.25

118.05

0.127226463

-22.56477534

196.75

115.3499985

NAME

SUGAR #11 (WORLD) Oct13

16.56

0.060422961

-17.44765703

22.03999901

15.92999935

ARISTOCRAT LEISU

COTTON NO.2 FUTR Dec13

85.75

0.070031517

8.902717805

89.55999756

74.34999847

CROWN LTD

World Stock Markets - Indices COUNTRY

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

DOW JONES INDUS. AVG

15518.74

-0.5981887

18.42624

15658.42969

12471.49

NASDAQ COMPOSITE INDEX

3665.77

-0.7360238

21.40266

3694.188

2810.8

FTSE 100 INDEX

6576.48

-0.4198837

11.50715

6875.62

5605.589844

DAX INDEX

8256.79

-0.5173662

8.465145

8557.86

6871

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

0.894 1.5305 0.928 1.3278 96.89 7.989 7.7563 6.1195 61.2688 31.43 1.2684 29.978 43.75 10311 86.629 1.23224 0.86752 8.1255 10.6076 128.66 1.03

-0.3233 -0.3451 -0.0323 0.0452 1.3108 -0.005 -0.0013 0.0343 -0.7508 -0.0955 0.0158 -0.0634 -0.48 -0.2425 1.6322 -0.0828 -0.3862 -0.0603 -0.0481 1.2514 0

-13.8562 -5.3845 -1.3578 0.6672 -11.1363 -0.0726 -0.0735 1.8155 -10.2398 -2.7044 -3.7055 -3.1523 -6.2743 -5.0238 3.1144 -2.0093 -6.0056 1.1322 -0.7278 -11.7286 -0.0097

1.0625 1.6381 0.9839 1.3711 103.74 8.0111 7.7664 6.3698 61.8063 31.62 1.286 30.228 44.181 10343 105.433 1.265 0.88151 8.4957 10.9254 133.8 1.032

0.8848 1.4814 0.9022 1.2256 77.13 7.9818 7.7498 6.1184 51.3863 28.56 1.2152 28.913 40.54 9448 79.408 1.20066 0.78128 7.799 9.7946 95.94 1.0289

Macau Related Stocks

460

COFFEE 'C' FUTURE Sep13

AUD GBP CHF EUR JPY MOP HKD CNY INR THB SGD TWD PHP IDR AUDJPY EURCHF EURGBP EURCNY EURMOP EURJPY HKDMOP

ASIA PACIFIC

WHEAT FUTURE(CBT) Dec13

NAME

Average 22.066

Currency Exchange Rates

Commodities ENERGY

Min 19.8

Max 22.6

PRICE

DAY %

YTD %

(H) 52W

(L) 52W

4.35

-3.761062

13.04

-2.759135

VOLUME CRNCY

38.09523

4.63

2.33

1997527

22.21181

13.75

8.48

2034313

AMAX HOLDINGS LT

1.04

0.9708738

-25.71428

1.72

0.75

1184700

BOC HONG KONG HO

24.7

-0.8032129

2.489625

22.85

5706680

CENTURY LEGEND

0.32

20.75472

0.42

0.22

CHEUK NANG HLDGS

6.55

0.4601227

9.348919

6.74

3.02

82000

CHINA OVERSEAS

-0.4329004

-0.4329021

25.6

17.28

29424408

CHINESE ESTATES

16.26

-2.048193

44.59055

16.98

7.824

516758

CHOW TAI FOOK JE

9.89

-1.297405

-20.49839

13.4

7.44

2158719

EMPEROR ENTERTAI

2.7

-1.459854

42.85714

3.07

1.35

1970000

2.15

4.368932

77.38892

2.76

0.993

5820000

GALAXY ENTERTAIN

40.85

-2.272727

34.59637

44.95

19.4

7069276

HANG SENG BK

120.5

-0.4132231

1.516431

132.8

109

1243940

HOPEWELL HLDGS

24.55

-0.203252

-26.16541

35.3

22.652

1612014

HSBC HLDGS PLC

84.1

-1.175088

3.444031

90.7

65.85

19691510

HUTCHISON TELE H

3.59

-0.5540166

0.8426983

4.66

2.98

7634765

LUK FOOK HLDGS I

22.55

-1.31291

-7.581966

30.05

16.88

1517000

MELCO INTL DEVEL

16.36

-3.195266

81.57602

18.18

5.54

4497121

FUTURE BRIGHT

NIKKEI 225

13824.94

-4.000539

32.99376

15942.6

8488.14

HANG SENG INDEX

21588.84

-1.527388

-4.714145

23944.74

19076.78906

CSI 300 INDEX

2280.623

-0.5675692

-9.604974

2791.303

2023.171

TAIWAN TAIEX INDEX

7921.29

-1.463134

2.880577

8439.15

7050.05

MGM CHINA HOLDIN

21.85

-4.585153

64.55445

23.65

10.437

8842352

KOSPI INDEX

1878.33

-1.483778

-5.944773

2042.48

1770.53

MIDLAND HOLDINGS

3.12

-1.577287

-15.67568

2.68

1428000

S&P/ASX 200 INDEX

5011.299

-1.847569

7.794204

5249.6

4261.2

NEPTUNE GROUP

0.175

-1.129944

15.13158

0.23

0.131

3640000

NEW WORLD DEV

-2.135231

-8.48586

15.12

9.38

13672694 8183715

JAKARTA COMPOSITE INDEX

4640.781

0.3556186

7.507928

5251.296

3978.078

FTSE Bursa Malaysia KLCI

1779.32

-0.2980993

5.350662

1826.22

1590.67

NZX ALL INDEX

971.682

-0.510715

10.16141

998.487

PHILIPPINES ALL SHARE IX

3923.56

0.03263408

6.071405

HSBC Dragon 300 Index Singapor

612.83

-0.41

-1.33

STOCK EXCH OF THAI INDEX

1425.35

-0.282638

HO CHI MINH STOCK INDEX

500.1

0.7129048

LAOS COMPOSITE INDEX

1355.17

-0.5226494

42.55

25.33137

43.7

23.7

SHUN HO RESOURCE

1.42

1.428573

1.67

1.06

794.41

SHUN TAK HOLDING

3.7

-2.37467

-11.69451

4.65

2.63

9448457

4571.4

3411.69

SJM HOLDINGS LTD

19.92

-0.1003009

12.24016

22.382

14.159

7858981

11.5

-0.3466205

-18.32386

17.38

11.48

940500

2.400977

1649.77

1206.64

21.45

0.7042254

2.386631

26.5

16.92

4210118

20.87593

533.15

372.39

11.55774

1455.82

1003.17

Shanghai Shenzhen Composite index is listing the biggest companies by market capitalisation. All data supplied by Bloomberg unless otherwise indicated.

SANDS CHINA LTD

SMARTONE TELECOM WYNN MACAU LTD ASIA ENTERTAINME

4.16

0.4830918

47.7964

4.7647

2.4835

97808

BALLY TECHNOLOGI

73.02

-0.7070982

63.31917

74.26

41.74

487324 2151

BOC HONG KONG HO

3.28

6.840393

3.6

2.99

GALAXY ENTERTAIN

5.43

1.876173

36.77582

5.77

2.47

900

INTL GAME TECH

18.75

-2.597403

32.32181

20.25

10.92

6156429

JONES LANG LASAL

89.49

-1.301423

6.611863

101.46

66.82

256993

LAS VEGAS SANDS

56.79

-1.764401

23.0286

60.54

36.3606

3399762

MELCO CROWN-ADR

26.05

-0.07671653

54.69121

26.42

10.01

2068597

MGM CHINA HOLDIN

2.98

7.194245

70.25737

2.98

1.4381

978

MGM RESORTS INTE

16.91

2.175227

45.27491

17.67

9.15

23539836

SHFL ENTERTAINME

22.78

-0.0877193

57.10345

23.08

12.35

1190143

SJM HOLDINGS LTD

2.59

13.71539

2.9481

1.8832

729240

139.18

-1.220724

23.72656

144.99

92.6497

1039146

WYNN RESORTS LTD

AUD HKD

USD

Hang Seng Index NAME

PRICE

DAY %

VOLUME

AIA GROUP LTD

35.2

-1.538462

21600867

CHINA UNICOM HON

ALUMINUM CORP-H

2.46

-0.4048583

11002531

CITIC PACIFIC

BANK OF CHINA-H

3.15

-2.173913

276265016

BANK OF COMMUN-H

5.01

-1.377953

21754337

BANK EAST ASIA

30.2

0.3322259

2048074

10.98

-4.188482

17066900

24.7

-0.8032129

14.06

-0.4249292

BELLE INTERNATIO BOC HONG KONG HO CATHAY PAC AIR

DAY %

VOLUME

11.24

-1.576182

23924800

8.35

-1.533019

5146165

DAY %

-1.849218

2757664

SANDS CHINA LTD

42.55

8183715

SINO LAND CO

10.94

-1.084991

6479472

SUN HUNG KAI PRO

102.6

-0.4849661

2414762

92.4

-0.1081081

1269346

360.2

-4.100106

4884068

19.4

-0.1029866

2141900

10.22

-1.541426

9579532

67.9

-2.582496

3145034

-0.931677

2195138

-0.9985735

36770989

COSCO PAC LTD

10.54

-3.302752

3568189

SWIRE PACIFIC-A

ESPRIT HLDGS

13.26

-0.1506024

5985134

TENCENT HOLDINGS

5706680

HANG LUNG PROPER

24.95

-2.348337

8079716

TINGYI HLDG CO

2571797

HANG SENG BK

120.5

-0.4132231

1243940

WANT WANT CHINA

HENDERSON LAND D

WHARF HLDG

111

-1.333333

2724069

-2.158273

32713831

47.5

-1.656315

2787237

87.05

-0.967008

1612504

HONG KG CHINA GS

19.84

-0.7007007

5545731

HONG KONG EXCHNG

120.5

-0.9860312

2052243

84.1

-1.175088

19691510

HENGAN INTL

5.57

-2.108963

168177360

CHINA LIFE INS-H

18.26

-1.722282

23691542

CHINA MERCHANT

23.2

-2.315789

2997816

CHINA MOBILE

82.1

-0.9052505

8681646

91.45

-0.2182215

6429826

-0.4329004

29424408

IND & COMM BK-H

4.93

-1.4

197963348

CHINA PETROLEU-H

5.61

-2.434783

92755213

LI & FUNG LTD

10.3

-1.340996

17121816

CHINA RES ENTERP

23.65

-0.8385744

4341922

MTR CORP

29.05

-0.8532423

1572511

21.9

-1.351351

3318042

NEW WORLD DEV

-2.135231

13672694

CHINA RES POWER

17.06

-0.8139535

9421705

PETROCHINA CO-H

8.8

-2.654867

96267936

CHINA SHENHUA-H

21.65

-2.036199

16283365

PING AN INSURA-H

49.25

-1.598402

10583404

CHINA RES LAND

PRICE

POWER ASSETS HOL

63.8

4.08

CHINA OVERSEAS

NAME

13.88

CHEUNG KONG

CLP HLDGS LTD

PRICE

CNOOC LTD

CHINA COAL ENE-H CHINA CONST BA-H

NAME

HSBC HLDGS PLC HUTCHISON WHAMPO

MOVERS

22273.82

LOW

21588.84

1 22280

INDEX 21588.84 HIGH

VOLUME

52W (H) 23944.74 (L) 19076.78906

21580

5-August

7-August

14 14

August 8, 2013 April 19, 2013

Classifieds Mountain Villa For Sale in Koh-Samui

Bruno Beato Ascenção

Price: HK$ 16 million

3 x King Bed en-Suites, 1 x King Bed basement Suite, 2 x 2 Single Bed, Spacious Living area and fully furnished kitchen, Swimming pool - children / adult, 2 levels Maid’s quarter, Fully Furnished, Balcony, Terrace / Patio, 2 x Outside Salas, Barbecue, 2 x Parking Spaces, 7-seater SUV included. Contact Ms Chan - Sarah@clever-cloggs.com.hk Tel: 2861-3317

Lawyer

Avenida da Praia Grande, no. 409, China Law Building, 11th floor. Tel:28785795 Fax:28785797 Email:bascencao@gmail.com

Recruitment

Marketing and Advertising Coordinator

Translations

Duties

Inês Dias

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editorial council Paulo A. Azevedo, Tiago Azevedo, José I. Duarte, Emanuel Graça, Mandy Kuok Founder & Publisher Paulo A. Azevedo | pazevedo@macaubusinessdaily.com Editor-in-Chief Tiago Azevedo DEputy Editor-in-Chief Vitor Quintã Associate editor Michael Grimes GROUP SENIOR ANALYST José I. Duarte Newsdesk Luciana Leitão, Stephanie Lai, Tony Lai EDITOR AT LARGE Alex Lee Creative Director José Manuel Cardoso WEB & IT Janne Louhikari Contributors James Chu, João Francisco Pinto, Larry So, Pedro Cortés, Ricardo Siu, Rose N. Lai, Zen Udani Photography Carmo Correia, Manuel Cardoso Assistant to the publisher Laurentina da Silva | ltinas@macaubusinessdaily.com office manager Elsa Vong | elsav@macaubusinessdaily.com Agencies Bloomberg, Reuters, AFP, Xinhua, Lusa, Project Syndicate Printed in Macau by Welfare Ltd.

Business Daily is a product of De Ficção – Multimedia Projects Address Block C, Floor 9, Flat H, Edf. Ind. Nam Fong Av. Dr. Francisco Vieira Machado, No. 679, Macau Tel. (853) 2833 1258 / 2870 5909 Fax (853) 2833 1487 Email newsdesk@macaubusinessdaily.com Advertising advertising@macaubusinessdaily.com Subscriptions sub@macaubusinessdaily.com

15 15

August 8,2013 2013 April 19,

Opinion

The regional route wires to global free trade Business

Leading reports from Asia’s best business newspapers

Taipei Times Chinese Nationalist Party lawmakers are sharply divided on whether to proceed with a proposal to authorise a referendum on the fate of the construction of the Fourth Nuclear Power Plant in New Taipei City’s Gongliao District. A second extra legislative session ended on Tuesday with the KMT-proposed referendum initiative stalled, much against the wishes of President Ma Ying-jeou. KMT caucus whip Lin Hungchih said his caucus “did not rule out calling a third extra session” to push through the referendum proposal before September 1, the day lawmakers register for a new formal legislative session.

Ana Palacio

Former Spanish foreign minister and former senior vice president of the World Bank

More significant, an engaged Japan that is willing to reach a deal will be a useful ally in pushing a forwardthinking and balanced trade agenda, particularly as the TTIP and the TPP appear headed for difficult waters. Japan’s entry into the TPP this spring was a game changer. With a GDP matching that of all other TPP partners combined (with the exception of the U.S.), Japan adds significant economic heft. But it also brings added complexity, reflected in the reluctance shown by the U.S. Congress immediately after Japan announced its desire to join the TPP negotiations, as well as in recent comments by American auto executives. The TPP is already in its 18th round of discussions, and, with some rumblings that China may join the negotiations, it appears that the talks will be prolonged significantly.

Myanmar Times The Myanmar Industries Association is urging members to consider alternate forms of private energy production to combat chronic electricity shortages, officials said. “Government-supplied electricity is cut regularly,” U Nyan Tun Oo, Yangon Region Minister for Electricity and Industry, said. “Industry owners face major expenses and challenges getting enough electricity. It’s time for us to consider private production and distribution systems,” he said. The minister, however, denied recent reports that the government plans to cut the electricity supply to industrial zones next April.

Korea Herald Mirae Asset Global Investments Co, one of the nation’s major financial firms, is pushing for an aggressive merger and acquisition of U.S.based assets, even as other brokerages express doubts, citing market maturity. The Korean firm is considering forming a consortium with U.S. private equity fund investors to purchase the L.A.-based coffeehouse chain Coffee Bean & Tealeaf. Besides the Coffee Bean deal, Mirae Asset has made purchase deals on a variety of U.S. sports titans and properties amid the global economic slowdown.

Jakarta Post Malaysia is 10th on the United Nations World Tourism Organisation’s (UNWTO) list of most-visited countries. The country recorded 25 million tourist arrivals in 2012. Out of the figure, 74 percent or 18.5 million tourists were from Singapore, Indonesia, Thailand, Brunei and the Philippines. Malaysian Association of Tour and Travel Agents vicepresident Tan Kok Liang said the number of Asean tourists to Malaysia was expected to keep increasing.

ith the moribund Doha Round of multilateral freetrade talks awaiting its last rites, a new wave of regional trade negotiations has de facto taken up the mantle of establishing a global trade regime. President Barack Obama’s administration has placed the United States at the centre of this shift, embracing two major simultaneous negotiations: the Transatlantic Trade and Investment Partnership (TTIP) with the European Union; and the Trans-Pacific Partnership (TPP) with 11 countries in the Americas and Asia. As the only party to both initiatives, the U.S. is well placed either to move them forward in harmony or to leverage the progress of one negotiation against the other. Beyond affecting America’s immediate negotiating partners, the latter approach would gravely damage progress in establishing a rulebased global system. The new strategy of regional negotiations can succeed and provide a foundation upon which an international trading regime can be built only if the TTIP and the TPP are balanced and approachable to the wider international community. Otherwise, there is the danger of creating expensive global imbalances and even fragmentation. Europe has an important role to play in this regard. Broadening the discussion beyond a focus on the big two agreements – and beyond some of their substantive issues – will create a sense of urgency and purpose, pushing the U.S. to engage actively or risk losing its central role in the global trade agenda. The EU is well placed to foster a conducive

atmosphere by parlaying its existing trade partnerships, beginning with TPP members Mexico and Chile, with which it has longstanding free-trade agreements, and Singapore, with which it recently completed freetrade negotiations. More significant are Europe’s other ongoing trade negotiations, which could be used to push the TPP/TTIP agenda forward. The EU-Canada talks, which should become a building block for harmonising the TTIP and the TPP, have stalled and must be revitalised. Even smaller ongoing negotiations, like those with Malaysia and Vietnam, offer some opportunity. Most important, however, are the recently launched EU-Japan free trade talks.

up a partly closed economy. Indeed, the OECD ranks Japan last among member states in terms of regulatory restrictiveness with respect to inward foreign direct investment. The Abe government has touted trade agreements as a good way to push through needed reforms, and, although it is too soon to know what Japan’s true position will be, indications are that it is a motivated negotiator. For Europe, which is seeking to expand its footprint in Asia, a strong link with a reformed Japanese economy would be a boon. Indeed, investment in Japan currently accounts for less than 3 percent of the EU’s total outward FDI.

Needed reforms Europe and Japan are both facing difficult challenges, including rapidly ageing populations and sputtering economies. Yet Japan enjoys the significant advantage of national cohesiveness, which occasionally allows for the type of bold and decisive action lacking in Europe. This assertiveness has been on full display under Prime Minister Shinzo Abe, who has vowed to attack Japan’s prolonged economic morass using “three arrows”: expansionary monetary policy, aggressive fiscal policy and structural reform. Abe’s determined pursuit of the first two prongs has been well documented. Structural reform, however, is a more difficult proposition, with strongly entrenched interests and cultural values militating against change and opening

The new strategy of regional negotiations can succeed and provide a foundation… if balanced and approachable to the wider community

Never easy Meanwhile, the euphoria that surrounded the TTIP in February, when Obama included it in his State of the Union address, has faded. Talk of “one tank of gas” has been drowned out by the drumbeat of l’exception culturelle and the revelations of U.S. spying on Europe made by the rogue American intelligence contractor Edward Snowden. The EU-Japan negotiations could be lithe in comparison. The bilateral nature of the talks makes them less unwieldy than the ever-expanding TPP. The disparity between the parties in terms of economic size – the EU’s GDP is almost three times larger than Japan’s – is not so wide as to lead to the strong-arm tactics seen in the EU-Canada talks (a relationship in which Europe has a tenfold advantage in terms of output). Moreover, the EU-Japan talks lack the historical, cultural, and emotional baggage of the transatlantic relationship, and relatively subdued attention to them provides an easier environment in which to hash out difficult issues, such as government procurement and food safety. Trade negotiations are never easy, and the EU-Japan talks will be no exception. But if these two big players, both struggling to regain their lustre, recognise the potential for the talks to be an engine for global trade reform, vital political will could and should be generated – particularly if European officials can develop a bit of Abe’s boldness. If we are to keep this de facto regional trade round moving forward, we need more than just the TTIP and the TPP to do the peddling. © Project Syndicate

August 8, 2013

Closing Amax eyes Pacific islands casino

Asia unit weighs on ING profits

Macau junket investor Amax Holdings Ltd is negotiating to buy outright a hotel and casino project in the Pacific island republic of Vanuatu off the east coast of Australia. Grand Hotel and Casino at Port Vila is controlled by units of Australian firm Zagame Corp Pty Ltd. According to Amax’s filing the venue does not yet have a gaming licence. Talks are under way with the aim of a formal deal “on or before 30th September 2013”, said Amax. On June 28, Amax said it was also negotiating to buy 51 percent of a casino in Northern Cyprus.

Dutch ING Groep NV posted a 39 percent drop in second-quarter profit as hedging losses for annuities sold in the U.S. and Japan outweighed improved banking results. The company took a 190 million-euro charge on a hedge aimed at protecting capital in the Japanese variable annuity business. Net income fell to 788 million euros (US$1.05 billion) from 1.29 billion euros a year earlier, ING said in a statement yesterday. The shares rose as much as 4.3 percent after earnings at ING’s banking arm grew by 14 percent, stoking optimism that a restructuring plan is paying off.

Two Koreas to resume Kaesong talks Working-level talks to be held next week on industrial complex

orth and South Korea agreed to resume talks on reopening on the Kaeseong industrial complex, a crucial source of hard currency for Kim Jong Un’s regime, two weeks after similar negotiations collapsed. The South accepted North Korea’s offer of working-level talks at Kaeseong to be held on August 14, Unification Ministry spokesman Kim Hyung-suk told reporters in Seoul. Along with the offer, made in a statement carried by the official Korean Central News Agency, North Korea said it would send its workers back into Kaeseong. South Korea had repeatedly warned it would make a “grave decision” on the future of Kaeseong if North Korea did not respond to what it called its final offer on July 29 for talks on resuming operations at the complex. The North withdrew its workers from Kaeseong in April amid heightened tension following tightened United Nations sanctions over its nuclear program and United

Exclusive HK golf course facing the cut H

ong Kong’s search for living space is training its sights on the city’s most prestigious golf course, as lawmakers push to have the site redeveloped for housing. “Why would we sacrifice the welfare of the people... (for) the recreational needs of a chosen few?” lawmaker Fernando Cheung told AFP. The Legislative Council passed a motion recently urging the government to allocate the land for two “new town” residential developments.

States-South Korean military drills. “North Korea probably could not ignore the fact the park is a cash cow and feeds not only the 53,000 workers

there but also their family members,” said Yoo Ho-yeol, a North Korea professor at Korea University. Talks on reopening Kaeseong collapsed la s t m o n t h after the two

sides failed to agree on a way to prevent future closures. North Korea earned US$100 million each year from the zone, according to Yang Moo Jin, a professor at the University of North Korean Studies in Seoul. “We expect a sincere and forward-looking attitude from North Korea,” the Unification Ministry’s Mr Kim said. The offer for talks came less than two hours after South Korea said it will pay 109 companies with operations at Kaeseong 280.9 billion won (US$250 million) in exchange for 90 percent of their assets in the North. It wasn’t clear if there was any link between the two announcements. North Korea said earlier this year that nuclear and economic development were the regime’s top priorities. North Korea’s economy is about one-fortieth the size of South Korea’s and the country relies on China for diplomatic and economic support. Chronic food insecurity and malnutrition affect about two-thirds of the country’s 24 million people, according to a United Nations assessment last year. Bloomberg News

A government spokeswomen told AFP the land would be included in a “study to explore further development potential in New Territories North, which is expected to commence in early 2014”. The Hong Kong Golf Club, which was formed in 1889, paid a one-off premium to lease the land. Its lease is up in 2020. It has been reported that it also pays HK$1 (13 US cents) a year on top of that. The club has a membership of just 2,500 and while nonmembers can play, it costs a hefty HK$2,000 a round. It is home to one of Asia’s biggest golfing events, the Hong Kong Open, which supporters say is important to the city. But observers say the debate signals a shift in people’s attitudes away from favouring business over the wider public interest. AFP

Bank of England pledges to help U.K. recovery T

he Bank of England overhauled its policy strategy yesterday, saying it planned to keep interest rates at a record low until unemployment falls to 7 percent or below, something unlikely for another three years. Barely a month after Canadian Mark Carney took over as governor, the central bank said it would keep interest rates at 0.5 percent unless inflation threatened to get out of control or there was a danger to financial stability. Mr Carney said a recovery in

Britain’s fragile economy was underway and it appeared to be broadening but he warned that it had a long way to go before it was on solid ground. The pound rallied after an initial fall on the announcement and British government bond prices were lower as the central bank’s commitment on interest rates fell short of some expectations of a more aggressive plan to revive growth. The Bank of England followed the United States Federal Reserve’s approach by setting an unemployment target rather than committing to keeping rates low for a set period of time but included get-out clauses. Policymakers said they stood ready to buy more government bonds if additional stimulus was needed and would not reverse existing purchases while unemployment was too high. Reuters